It is no secret how the industrial real estate asset category has been playing a crucial role in recent years in the growing e-commerce market, transforming the way how consumers shop and receive their goods. Services like same-day delivery are gaining traction, and last-mile properties in high-income urban areas have been witnessing solid pricing, occupancy and growth in rentals.
And the icing on the cake is the social-distancing norm amid this pandemic, which is fueling online orders and substantially boosting e-commerce’s share of total retail sales. Consumers’ habits are transforming at a rapid pace, and even the reluctant ones, who once favored in-store purchases, now prefer online purchases in order to avoid physical contact and spread of infection.
Per the U.S. Commerce Department, e-commerce sales soared 44% year over year in the June-end quarter. Moreover, eMarketer expects e-retail sales to contribute a whopping 14.5% to total U.S. retail sales this year. This is poised to lift all boats and specifically, the industrial REITs, which provide the critical infrastructure for e-commerce operations, are witnessing robust demand for spaces, driving leasing and development activity.
And why wouldn’t that be? On an average, online retailers require three times the warehouse spaces compared with traditional retailers. In addition, demand is emerging not only from the direct-to-consumer e-commerce companies but also from retail and consumer product firms. These companies are focusing on their supply-chain networks to cater to the skyrocketing demand from online shoppers amid the pandemic.
As such, the industrial asset category is witnessing low vacancy rates, high-asking rents and robust rent collections. This is also ensuring more certainty as well as the fuel for investments in this sector.
Furthermore, apart from the fast adoption of e-retail, the industrial real estate space is anticipated to benefit over the long run from a likely increase